Reid's Right: Let's Cash in on Online Poker

For once, the Senate Majority Leader has got a good idea. Reid's bill to allow online poker could create thousands of jobs and provide a tax revenue boom.

Senate Majority Leader Harry Reid, previously a tepid supporter of efforts to restrict online gambling, has, The Wall Street Journal reports, begun to circulate a bill that would sweep away some of the dumbest federal regulations around and create a legal framework for people who want to play poker online.  The bill doesn’t go nearly far enough—the entire mechanism by which the federal government tries to ban online gambling needs to be dismantled—but it’s a good start that could provide the economy with a modest boost.

Indeed, it’s difficult to overstate the stupidity of the current regulations concerning online gambling. Under the Unlawful Internet Gambling Enforcement Act of 2006 and, to a lesser extent, the Wire Act of 1961, the federal government imposes a Rube Goldberg like series of banking regulations intended to stop Americans from placing bets online. The system imposes enormous compliance costs on banks, doesn’t actually stop anyone from gambling (a search for “online casinos” returns 11.5 million Google hits), and attempts to prohibit an activity that’s legal in 48 of 50 states. (The two exceptions are Utah and Hawaii; and most of Utah’s population lives within easy driving distance of Nevada casinos.)  In a country that has banned gambling in most places—as the United States did before the 1980s—trying to ban online gambling could make sense. Today, it’s just stupid.

Reid’s bill (I’ve seen a summary) narrowly targets online poker playing and sets up a framework for it to work. (Current law tries to ban the banking transactions associated with online poker playing but doesn’t outlaw the activity per se.)

Certainly, it makes sense as a start. Poker is the game that plays best online--slot machines loose a lot when they aren’t surrounded by cocktail waitresses, all-you-can-eat buffets, and over-the-top production shows--and, as a game of skill that hundreds of people play professionally, arguably really isn’t “gambling” anyway. Financially struggling Nevada-based casino owners, Reid’s largest campaign contributors, see it as a potential cash cow and boost for the state’s struggling economy.

But there’s no good reason to stop with poker. Since Americans can and will gamble with or without federal permission and gambling has proven a pretty good source of revenue and jobs, a full-fledged legalization and regulation of online gambling makes a lot of sense. Indeed, it’s a policy with next-to-no downside: since almost everyone who wants to can gamble anyway, there’s little reason to think that any negative externalities associated with gambling would increase under a regime that legalized it. On the other hand, states and the federal government would reap plenty of tax revenue and many jobs, perhaps thousands, would be created.

Republicans, in thrall to a few religious groups that want to pretend away gambling’s widespread social legitimization, may continue to fight Reid’s proposals and other, broader efforts. Three Republican Senators have already circulated a bill opposing Reid’s measure. But the source of policy shouldn’t matter—only its content. For once, at least, the Senate Majority leader has gotten something right.